As the industry continues to parse underwriting categories and develop new
products, pinpointing mortality will become more critical, say executives at
Swiss Re Life & Health America, Stamford, Conn.

Toward that end, building a base of data will become more important, says
Weldon Wilson, CEO of Swiss Re Life & Health America.

Part of the key to understanding mortality is examining it from the
perspectives of an actuary, underwriter and a medical director, adds Tracy Choka, senior vice president and director of applied
research and development with Swiss Re Life & Health America. In effect,
this means developing a "collective knowledge."

A major question is whether mortality trends will continue to improve.

That is a difficult call, according to Choka, who
says the direction is unclear because of both positives and negatives that are
turning up.

Some of the positives, Choka says, are improvements
in cardiovascular trends as well as the availability of more genetic
information.

Another positive is the decline in smoking. The 1975-80 mortality tables
indicate a 30% prevalence for smoking, a total that
declined to 8-10% in the 1990-95 table.

But, she adds, potential uncertainties regarding mortality may include trends
in infectious diseases as well as a greater prevalence toward obesity.

But even on the issue of obesity, there are offsetting factors, Choka continues.

While new drugs and education could drive some improvement in containing the
trend, "it is a lifestyle or behavioral component as with smoking,"
she adds.

So, it might take time before those benefits are realized, Choka
says. For instance, it took about 25 years before the benefits of coronary
bypass surgery were fully realized.

Because of these mixed signals, it is important for insurers to take care when
fine-tuning preferred risk underwriting categories, she continues. "As an
industry, we have got to really watch it."

That means keeping abreast of factors such as medical technology, she says.

But it is important to underwrite cost effectively, Wilson adds. For example,
using an attending physician’s statement may cost $50 compared with other tools
such as a motor vehicle report that could cost $7, he says. Keeping track of
costs is important because in a competitive market, insurance companies need to
be able to offer policies at an affordable rate, he notes.

The use of preferred classes also depends on what geographic areas and
distribution an insurer is targeting, according to Choka.

The distribution method—broker, career agent and Internet, for example—as well
as changes in field underwriting, could alter mortality, Choka
says.

What will help insurers offer new products going forward is a focus on basics
including strong underwriting and pricing, she adds.